In his analysis of Califo

In his analysis of Califo

In his analysis of California?s Proposition 103 (see Illustration 4.3), Benjamin Zychernotes that one of the most important provisions of this proposition is eliminating thepractice by insurance companies of basing premiums (in part) on the geographic locationof drivers. Prohibiting the use of geographic location to assess the risk of a drivercreates a substantial implicit subsidy from low-loss counties to high-loss counties, suchas Los Angeles, Orange, and San Francisco counties. Zycher hypothesizes that the percentof voters favoring Proposition 103 in a given county (V) is inversely related to the(average) percentage change in auto premiums (P) that the proposition confers uponthe drivers of that county.The data in the table below were presented by Zycher to support his contention thatV and P are inversely related:DEPENDENT VARIABLE: S R-SQUARE F-RATIO P-VALUE ON FOBSERVATIONS: 36 0.2247 4.781 0.0150PARAMETER STANDARDVARIABLE ESTIMATE ERROR T-RATIO P-VALUEINTERCEPT 175086.0 63821.0 2.74 0.0098A 0.8550 0.3250 2.63 0.0128R 0.284 0.164 1.73 0.0927158 PA R T I Some PreliminariesPercent for Change inProposition 103 average premiumCounty (V) (P )Los Angeles 62.8 21.4Orange 51.7 8.2San Francisco 65.2 0.9Alameda 58.9 8.0Marin 53.5 9.1Santa Clara 51.0 11.8San Mateo 52.8 12.6Santa Cruz 54.2 13.0Ventura 44.8 1.4San Diego 44.1 10.7Monterey 41.6 15.3Sacramento 39.3 16.0Tulare 28.7 23.3Sutter 32.3 37.1Lassen 29.9 46.5Siskiyou 29.9 49.8Modoc 23.2 57.6Sources: California Department of Insurance and Office of theCalifornia Secretary of State.Using the data in the table, we estimated the regression equationV a bPto see if voting behavior is related to the change in auto insurance premiums in a statisticallysignificant way. Here is the regression output from the computer:a. Does this regression equation provide evidence of a statistically significant relationbetween voter support for Proposition 103 in a county and changes in average autopremiums affected by Proposition 103 in that county? Perform an F-test at the 95percent level of confidence.b. Test the intercept estimate for significance at the 95 percent confidence level. IfProposition 103 has no impact on auto insurance premiums in any given county,what percent of voters do you expect will vote for the proposition?c. Test the slope estimate for significance at the 95 percent confidence level. If P increasesby 10 percent, by what percent does the vote for Proposition 103 decline?

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